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October 2010

Today on the Consumerism Commentary Podcast, Tom Dziubek talks to Farnoosh Torabi, author of the book Psych Yourself Rich: Get the Mindset and Discipline You Need to Build Your Financial Life and Money Coach on the SOAPnet reality TV show Bank of Mom and Dad. Tom and Farnoosh discuss many of the topics in her book such the definition of being “rich”, the things you need to feel rich and also how people can apply Google’s “20% rule” to their own lives. Finally, Farnoosh talks about “Bank of Mom and Dad”.

Consumerism Commentary Podcast #80
Psych Yourself Rich, Farnoosh Torabi: S04E2 / 102

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Table of contents

[00:00] Introduction from Tom
[00:36] Interview with Farnoosh Torabi
[00:51] Farnoosh’s background
[04:02] Being “rich”
[07:30] Financial responsibilities in a relationship
[08:55] Money that works
[10:00] The concept of retiring with millions of dollars
[12:27] Goal ambivalence
[16:32] Google’s 20% rule
[19:56] Getting yourself on the path to psyching yourself rich
[23:46] Bank of Mom and Dad
[30:21] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

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This is a guest article by Stella Louise, editor of Blog & Save from

I was my neighborhood T.J. Maxx recently debating between two pairs of boots: Both were low heel, knee-high black boots, but one was a more trendy version with black stretch panel inserts by a reputable brand name, while the other pair were basic, classic and unadorned and by a more premium shoe maker. The second pair was also twice the price of the more trendy boots.

I bought the more expensive pair.

I would have saved $50 if I had based my decision solely on price, but I decided to “think outside the shoebox” as it were and factor something else into my decision. It wasn’t the fact that the more expensive boots were manufactured by a more prestigious designer and that they were actually worth 2-3 times the T.J. Maxx price, it was the fact that I’d most likely get more use out of the basic, classic style vs. the trendier pair of boots.

Here’s the thing: I already own three pairs of black boots. The first pair is a short style to be worn under pants. After purchasing them, I knew I still “needed” a pair of knee high boots to wear with dresses and skirts, so when I found a pair of faux suede boots with a pointy toe and killer stiletto heels for only $18, I thought I had it made. Unfortunately, “killer” doesn’t only apply to the look of the boots, but what they do to my feet as well.

The third pair of black boots I bought are knee high with a more moderate heel, as well as being cuffed at the top and having strap-detailing across the front of the ankle. They are easier to wear than the stiletto boots, but are not exactly wearable. They don’t zip up, which means if I want wear them over jeans I have the impossible task of trying to shove pant legs inside the boot without them getting all bunched up. And the detailing which makes them unique and stylish, also limits what they can be worn with.

The reasons I bought them: they were black, they were knee-high, they were more comfortable than the stiletto boots and, most importantly, they were cheap.

Except, when all is said and done, they weren’t because I haven’t gotten much use out of them at all. Since I had already sunk a bit of money into several pairs of boots to begin with, I let cost, rather than functionality, be the deciding factor in my decision. So I settled for a pair that weren’t very versatile because at the time they seemed to be a good buy.

Penny-wise and pound foolish,” as my Dad might say–for when you base a purchasing decision solely on price, you can end up paying much more in the long run.

Whether it’s the winter coat that falls apart after only one season, or the iPhone knock-off that doesn’t have the essential features you actually need or the gym with the lower membership fee that doesn’t have the equipment or classes that make it worth actually getting yourself to go there to work out, settling for “close enough” can have some serious financial ramifications. In the case of the cheap coat, you’d end up shelling out for a new one next season when it would have been more cost effective to spend the extra cash up front for a better-made version that would last several years. The cheap gym could cause you to eat a hefty initiation fee when you finally move to one that’s more suitable–not to mention the months of paying dues and never using the facilities. And if you’re really jonesing for an iPhone, chances are that the knock-off you settled for will end up gathering dust in favor of you splurging to get the coveted gadget.

In fact more often than not, “settling” only leads to costing you extra money in the long run. Everything being equal, it makes sense to choose the lower price–but, as I’ve written before, there are a number of situations where cheaper isn’t better. So before making a purchasing decision, make sure you take into account factors other than just price–including quality, value, functionality, usefulness, longevity, etc. Because whether it’s a lifemate or a laptop, settling can have costly consequences.


The trend of financial over-sharing continues, and I’m glad to have been on the leading edge. I’ve been sharing the details of my finances, including spending habits, since I created Consumerism Commentary in 2003. The idea of social net worth continued with sites like NetWorthIQ, which allowed the public to post family net worth and compare numbers with others.

Mint has since become the most popular way for tracking finances online, and this website has been collecting spending data for some time, analyzing and categorizing each transaction.

Once Mint crossed the million user mark, the data was collected in aggregate to get a better look at the country’s economic condition. Now, with a user base expanded even further, Mint has opened its data vaults to the public with the ability to drill down to the city level. You can now see, for example, the most popular restaurants in New York City (based on number of transactions) or the most expensive clothing shops in San Francisco (based on average purchase price).

The city-based data is interesting for drawing conclusions (or making assumptions) about the most populous areas of the country. Unfortunately, there is only enough data to compare three cities in my state. In New Jersey, the only cities available are Jersey City, Newark, and Trenton. Don’t expect to find data for suburbs like Ewing or Princeton within the Trenton data; it appears to include the city proper only, defined presumably either by zip code of merchant or zip code of Mint user.

Mint Data fulfills a certain financial voyeuristic intention. There is some value in determining whether the amount you spend at McDonald’s every month is more or less than the average New Yorker, but these type of comparisons are generally unsatisfying past the surface. The type of comparison that is more worthwhile is a look at the change over time for an individual or a location, and Mint Data offers this option.

The services produces attractive charts that can be embedded in websites. Here is how spending at Bubba Gump New York, a restaurant apparently inspired by Forrest Gump, has changed over the past few months and how it compares with overall spending on restaurants in the city.

The key to improving your finances is to forget about these comparisons. What does it mean if you spend $200 a month in clothing stores while the average spending in your city is $100? It doesn’t necessarily mean anything other than that. Different people have different financial situations and different needs. None of this is apparent in aggregate comparisons. Without drilling down on the demographics to a very fine level of detail, the only relevant analysis is a comparison with the earlier you.

Check out Mint Data or sign up to track your finances on Mint for free.


It’s easy to fall into financial habits. Even people who consider themselves inflexible can grow accustomed to a financial change after time. That’s the beauty of automation — an automatic 10 percent transfer to a high-yield savings account every time you receive a paycheck eventually becomes painless.

Habits aren’t always perfect; just as you adjust to your surroundings, it’s easy to forget the situation that inspired the habit, or even worse, that the automated transfer is even there. I suppose it’s easier for things to get lost when you have 60 or more financial accounts like me rather than fewer than ten like most normal people. (I have so many because I continually open new accounts of various types to review for Consumerism Commentary; without this website, I wouldn’t be such a collector.)

I’m making a few changes to my habits.

First, I have been using SmartyPig as a goal-oriented savings mechanism. Every other week, coordinated with my paycheck, $170 has been automatically withdrawn from my ING Direct checking account and deposited into my SmartyPig account. My plan when initiating the automatic transfer was to set aside money for a new digital camera, but since then I’ve decided I’m fine with my current equipment, which admittedly has expanded otherwise since initiating the savings goal, and I probably won’t buy a new camera for another year.

Now that the goal is complete, SmartyPig has stopped the automatic transfers.

I’m in the process of changing my method of dealing with charitable contributions. In the past, I’ve given to charity towards the end of the year. Last year, I matched Consumerism Commentary readers’ charitable donations for Thanksgiving in addition to giving independently to a few of my favorite causes, and I might do the same this year. I’m stepping up my charitable involvement by adding an automatic monthly contribution to my charitable gift fund which I will then use to grant donations to organizations as needed.

The disadvantage of using a charitable gift fund is my employer will not match funds. To have a bigger effect on an organization, as long as I am employed, I usually give directly the charity and submit the paperwork for my employer to match.

One of the biggest factors for me in growing wealth for retirement is the SEP IRA. Self-employed individuals can enjoy a high maximum on tax-deferred growth, and anyone can be self-employed to an extent. In the past, I’ve waited until tax time to fund each year’s SEP IRA, but now I’ll be making an automatic contribution of $1,750 on a monthly basis.

Still for me to consider is whether I should begin investing in a fund for a theoretical future child’s education. The tax benefits are helpful, but there’s no guarantee I’ll ever have children. The penalty for not using funds for educational purposes is steep, so although I may be missing out on some gains, I think I’d rather wait until I know children are in my future.


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